Mon June 3, 2013

Apple Gets Day In Court Over Alleged E-Book Price Fixing

Now, in today's ALL TECH CONSIDERED, Apple on trial. The company is in federal court today fighting government charges that it colluded with book publishers to drive up the price of electronic books.

AUDIE CORNISH, HOST:

The Justice Department claims publishers used the introduction of the iPad as an opportunity to set higher prices. Five publishers have already settled civil charges with the government, but Apple has not. Laura Sydell is in New York, covering the first day of the trial. Hi there, Laura.

LAURA SYDELL, BYLINE: Hello there.

CORNISH: So, first of all, why is Apple making a stand here in going to court rather than settling?

SYDELL: Apple says - you know, their lawyer pretty much stated it upfront: because we didn't do anything wrong. And I also think because Apple is concerned that when it negotiates other deals for other kinds of content in the future, they don't want the government looking over their shoulder. So I think that is also part of the motivation for sticking it out.

CORNISH: Laura, you've been watching the first day of the trial. What exactly does the government allege Apple was doing to fix prices?

SYDELL: Well, basically they say that the publishers were very unhappy with Amazon's pricing of $9.99 on books, and so they talked to each other and said, let's come up with a better model. And essentially Apple joined them and became part of a conspiracy that would make the price of e-books be higher because the publishers would be happy and Apple would make more money. And that's the core of the government's case.

CORNISH: And Apple's response?

SYDELL: Apple's response is that it did nothing of the sort. It came into this as a novice to the book publishing business, and it was simply trying to be competitive and to come up with a way for competitive pricing. It used what is a typical model for it, which is it said, hey, we'll take a 30 percent cut and you set your prices. And that's all Apple did. It really had no knowledge or understanding of what the publishers wanted other than what it saw in the newspapers.

CORNISH: But give us some context here. What's happened to prices for e-books since Apple got into the market?

SYDELL: You know, this is a point that Apple's attorney made really strongly. He said, what kind of antitrust price fixing case do you have when actually the prices of e-books have gone down or remained the same? So what kind of a case is the government really making here? Because when you look at the market for consumers, the market is actually pretty good.

You know, at one point, all books were $9.99, and that was Amazon's pricing scheme. Right now, you can find books for as little as $2.99. So I think that's going to be a crucial part of Apple's case going forward.

CORNISH: So, Laura, what's next in this trial? What should we be on the lookout for?

SYDELL: Lots of bigwigs coming through. So you're going to see the heads of major publishing houses come through here. You are going to see Eddy Cue, who is very high up at Apple, and he is the man who negotiated all of these deals, and I think his testimony is probably going to be most important. And, of course, you're going to be seeing emails from the late Steve Jobs.

And crucial in this case is motivation, whether or not Apple was actually motivated to fix and raise prices. And as Apple's lawyer said, we have a problem when it comes to Steve Jobs because unless we have a seance, we're not going to be able to get him to really talk about his motivation.